Natural gas futures gain on outlook for higher demand

Natural gas rose in early European trading on Wednesday, its first advance in three days, amid projections for stronger cooling demand as temperatures across most of the US become very warm to hot.

Natural gas for delivery in August traded 0.88% higher at $2.740 per million British thermal units at 09:22 GMT, shifting in a daily range between $2.742 and $2.699. The contract slid 1.45% on Tuesday to $2.716, adding to Mondays 2.3% drop.

According to NatGasWeather.com, natural gas demand in the US will be moderate compared to normal the next two days, before rising to high through July 14th. A strong weather system and an associated cool blast currently sweeping across the central US and Great Lakes will fizzle today, allowing high pressure to rapidly build. It remains quite warm over the Southeast and Mid-Atlantic Coast, with highs in the mid 80s to lower 90s.

The West will cool as Pacific weather systems arrive and shift high pressure over the central and eastern US, resulting in temperatures reaching the lower 90s swiftly spreading over the North and East this weekend. Conditions over Texas and the southern Plains will become quite uncomfortable as highs establish in the mid 90s to lower 100s, lasting through next week.

A weather system will bring slight cooling to the northern and eastern US early next week, NatGasWeather.com said. However, high pressure over the southern and central regions of the country is expected to expand northward almost immediately, pushing temperatures back to very warm and hot levels. Texas and the Plains will likely remain hot through the end of July, while the West will also turn warmer late next week.

Readings

According to AccuWeather.com, highs in New York will be near the average of 84 degrees through July 18th, or slightly higher. Chicago will peak at 67 degrees today, 17 below usual, before jumping to the low-mid 80s as of July 10th.

Down South, temperatures in Houston will max out at 92-94 degrees through July 16th, compared to the usual 92. On the West Coast, highs in Los Angeles will be in the 70s through July 11th, compared to the average 83, before jumping to the low and mid 80s afterwards.

Supplies

Tomorrows inventory report by the Energy Information Administration is expected to show a slightly larger than normal build, reflecting the tracked periods pleasant conditions over the eastern and northern US. Stockpiles are expected to have risen by close to 90 bcf during the week ended July 3rd, compared to the five-year average inventory gain of 75 bcf, while supplies jumped by 94 bcf a year earlier.

Last Thursdays data showed a build of 69 billion cubic feet during the week ended June 26th, largely in line with analysts’ median forecast and below the five-average build of 75 bcf. Total gas held in US storage hubs amounted to 2.577 trillion cubic feet, narrowing a surplus to the five-year average of 2.548 trillion to 1.1% from 1.4% during the preceding week.

Next weeks report will be affected by the pleasant conditions over large portions of the country last weekend through the middle of the current week, with early estimates pinning the build again at around 90 bcf. However, this will add to surpluses at a faster pace as the five-year average gain for the week ended July 10th drops to 71 bcf. Supplies added 105 bcf during the comparable period a year earlier.

Pivot points

According to Binary Tribune’s daily analysis, August natural gas futures’ central pivot point stands at $2.735. In case the contract penetrates the first resistance level at $2.781 per million British thermal units, it will encounter next resistance at $2.847. If breached, upside movement may attempt to advance to $2.893 per mBtu.

If the energy source drops below its S1 level at $2.669 per mBtu, it will next see support at $2.623. In case the second key support zone is breached, the power-station fuel’s downward movement may extend to $2.557 per mBtu.

In weekly terms, the central pivot point is at $2.814. The three key resistance levels are as follows: R1 – $2.893, R2 – $2.964, R3 – $3.043. The three key support levels are: S1 – $2.743, S2 – $2.664, S3 – $2.593.